Financial Inclusion and Its Extent- Study of Majri Village Taranpreet Kaur Walia Assistant Professor, Dept of Economics B.L.M. Girls College NSR Page 390 I. INTRODUCTION Financial inclusion is new paradigm of economic growth which plays a major role in driving away the poverty. Lack of access to financial services in most of the rural areas are due to high informative barrier,low awareness, poor functioning of financial institutions, near absence of insurance and pension service create the need and scope of financial inclusion. Even after 70 years of independence, a large section of Indian population still remains unbanked. Fruits of development have hardly reached to nearly half of Indian population because no access to loan and insurance and this raises most pertinent issue of financial inclusion. It is a policy of involving a wider section of population deposit mobilization and credit intermediation. Financial inclusion refers to delivery banking services to masses including privileged and disadvantaged people at an affordable terms and conditions. It not only enhances overall financial intensity of agriculture but also help in increasing rural non-farm activities which lead to development of rural economy and improve economic conditions of people. Financial inclusion means *Basic no frills bank account for receiving payments/ savings/ deposits *Small loan/overdraft facilities *Money transfer facilities *Insurance (life / non-life) services *Financial advisory services Definitions of Financial Inclusion ADB 2000 Provision of a broad range of financial services such as deposits, loans, payment services, money transfers and insurance to poor and low income households and their micro enterprises. United Nations 2006 A financial sector that provides access to credit for all bankable people and firms, to insurance for all insurable people and firms and to savings and payment services to everyone. Inclusive finance doesn t require that everyone who is eligible to use each of the services, but they should be able to choose to use them if desired. (The Committee on Financial Inclusion, Chairman: Dr. C. Rangarajan). 2008 Financial inclusion may be defined as the process of ensuring access to financial services and timely and adequate credit were needed by vulnerable groups such as weaker sections and low income groups at an affordable cost. World Bank 2008 Broad access to financial services implies an absence of price and non price barriers in the use of financial services: it is difficult to define and measure but access has many dimensions. II. REVIEW OF LITERATURE Tejani,Rachana(2010) in the article titled Financial inclusion and performance of rural cooperative banks in Gujarat evaluated in the group of 23 states for which three dimensional index of financial inclusion has been estimated that led to Kerala with highest value of IFI followed by Maharashtra and Karnataka. Gujarat was lagging behind at 11 th place. There is a significance impact of occupation on having the bank accounts. But those who are land laborers and are doing low level jobs do not have account. The researcher finally concluded that through RRB s and PACC s have a good coverage but most of them are running into losses. The wide penetration of PACC s across the nation as well as villages would act like a catalyst while pursuing the objective of 100% financial inclusion.
Rao, Maruti, N. & Talwar, Vishwanath (2010) in their paper titled Financial Inclusion in India - A Case Study of Belagavi City took five vulnerable areas of Belgaun City and 25 respondents from each vulnerable area to access the level of financial inclusion among the rural section of the society. Further they also intended to understand the difficulties faced by banks in the area of financial inclusion. The study found that majority have not opened their bank accounts due to lack of awareness and those who have opened are unaware of financial services offered by the banks. The study highlighted financial inclusion as delivery of banking services at an affordable price in a fair and transparent manner to the vulnerable sections of the society. Thimmaiah, Navitha. & Anitha, C.V (2012) in their article titled, Financial Inclusion and the Road Ahead, has taken secondary data to examine the strategies of financial inclusion in other developing countries and its relevance to India. The study concluded that still 100% financial inclusion is not achieved in India. They found that a concerted and structural effort by all stake-holders multi-sector strategy and the ICT are necessary in order to achieve 100% financial inclusion. Gowda, Kempe, G.N. & Nadeesha, H.K. (2012) in their research paper titled, Role of Banks in Achieving Financial Inclusion: A Case Study of State Bank of Mysore in Mysore District took primary and secondary data from a sample of 200. Two Taluks of Mysore district were taken. Their aim was to analyze different dimension of financial inclusion and measures taken by banks for financial inclusion in Mysore district. The study concluded that the state bank of Mysore extending financial services to all the taluks in the district but has not achieved the target to a large extent. Financial illiteracy, time consumption, high cost, distance etc continue to be a road block in the financial inclusion in many areas. Bhatia, Shivangi & Singh, Seema (2015) in their article titled, Financial Inclusion: A Path to Sustainable Growth. Its objective was to targets banking facilities for all by the end of 2018. Just framing the policies won t do needful rather supervising their implementation and devising such mechanism which are for the ease of excluded people will suffice the action and help in achieving the set goals.they concluded that India is at moderate level of financial inclusion and thus it need to implement its policies more efficiently and effectively so as to achieve the targets of banking facilities for all. Need for Financial Inclusion The economic objective behind financial inclusion was to achieve equitable growth, mobilization of savings larger market for financial system.the social and political objective is to eradicate poverty, to provide sustainable livelihood, wider inclusion in society and effective direction of good programs. There is a need for the formal financial system to look at increasing financial literacy and financial counseling to focus on financial inclusion and distress amongst farmers. Indian banks and financial market players should actively look at promoting such programs as a part of their corporate social responsibility. Banks should conduct full day programs for their clientele including farmers for counseling small borrowers for making aware on the implications of the loan, how interest is calculated, and so on, so that they are totally aware of its features. This is clear that a lot requires to be done in this area. Theoretical Frame Work Financial Services or products provided by banks, finance companies, postal saving banks, credit unions, Insurance Companies, Micro Finance Institutions and other formal Financial Institutions generally form the basis for Financial Inclusion. The financial services rendered by the informal sources such as money lenders, traders etc. do not come under the preview of Financial Inclusion as they are limited in supply and exploitative in nature. The formal financial institutions help in mobilizing savings and efficient allocation of funds for development. Efficient and well-functioning financial institutions are crucial in channeling funds to the most productive uses and thereby boost economic growth.there are supply and demand side factors driving inclusive growth. Banks and other financial services players largely are expected to mitigate the supply side processes that prevent poor and disadvantage social group from gaining access to financial system. Access to financial products is constrained by several factors which include lack of awareness about the financial products, unaffordable products, high transaction costs and products which are not convenient, in flexible, not customized and are of low quality.financial inclusion promotes thrifts and develops culture of saving and also enables efficient payment mechanism strengthening the resource base of financial institutions which benefits the economy as a whole. Page 391
Dimension of Financial Inclusion 1. Penetration Per cent of all households that use services Per cent of households living in rural with no banking facilities 2. Affordability Costs to use service Minimum requirement (for opening account) Fees associated with service 3. Convenience Days to complete transaction. Documents required. Rationale of Study Majority of world population do not have access to formal financial services. The policy makers recognized the fact that the potential of rural India should not be under estimated. The banks have to play dual role in rural areas to institutionalize the rural savings for development activities as a part of commercial banking. They help in the social upliftment of the poor as a part of social banking. The present study is an attempt to study the extent of financial inclusion among the people of Village Majri. III. RESEARCH METHODOLOGY The main instrument for the collection of primary data was set of structured questionnaires.door to door survey was conducted from 72 individual household members. Information on age, sex, marital status, relationship to the head of the household and education was collected. Information was also collected with respect to religion, caste and ownership of land and their main occupation. The questionnaire was mainly designed to collect information on the status of deposit bank accounts of the family and also the cost associated in accessing the banking services outside the village. Further, questions were asked on the core banking services availed by the people of village Majri. The sample was selected by administering convenience sampling technique. population in rural area is 88551, out of which 47,892 are males and 40,659 are female. The Scheduled Caste population in rural area is 25,531. Kurali is the only town in the block and has population of 23,047. All the villages numbering 116 have been allocated among 8 branches of commercial banks and one branch of Punjab Gramin Bank. There are 16 branches operating in this block which comprises 9 branches of commercial banks. 1 Pvt. Sector Bank, One branch of PGB and SAS Nagar central co-operative bank is having 5 branches. Due to certain incentives being initiated by the Govt. many large and small-scale industrial units have been established around Kurali. The native language of Majri is Punjabi. Majri people use Punjabi language for communication. IV. OBJECTIVES OF THE STUDY 1. To assess the socio-economic status of the respondents of Majri village. 2. To identify the factors affecting the extent of financial inclusion among vulnerable section of Majri village. 3. To check the association between economic category and type of bank account opened by people of village Majri. The first objective i.e socio economic status is analyzed with the help of Frequency distribution Tables.The factor analyses technique has been applied to meet the second objective.chi square test has been applied to meet the third objective.the hypothesis framed is as follows Ho: There is an insignificant association between economic category and opening of bank account among people of Majri village. Analysis of the Data Majri Village Majri is a village panchayat located in the Rupnagar district of Punjab State, India. Chandigarh is the state capital for Majri village. It comprises of 116 villages.the total population of this village was 111,598 as per 2001 census. The Page 392
The table below shows the awareness of Direct Benefit Transfer(DBT) and benefit received from DBT. Page 393
Factor Analysis To identify the factors affecting the extent of financial inclusion among vulnerable section of Majri village KMO has been computed to measure sampling adequacy. KMO with.633value, showed data has been sufficient to proceed with the factor analysis. The total variance explained by factors has been 63.7%. encourage people to open accounts in bank and avail the facilities and services provided by the banks. Second factor named Support System explains that people get motivated if they have help of their known who help them in opening a bank account. Third factor named obstacles also determines the extent of financial inclusion. Hurdles like distance, time, financial literacy hinders the growth of banking services in the rural areas. Obstacles have negative influence on the growth of financial inclusion in the vulnerable section of village. Use of account forms the fourth factor. People can get the benefit of direct benefit transfer to their account the amount of pension, gas subsidy and MGNREGA wages. It has led to transparent transfers of money. Last factor is type of account opened also helps in increasing the access of financial services provided by banks. People can easily avail loans from the banks for commercial purposes and creating assets. Chi Square- the table below shows people of all economic categories prefer to open bank account. Interpretation The five factors have been identified which affect the extent of financial inclusion among people of Majri village. These factors are named as socio-economic factors i.e Support System, Obstacles, use of accounts and type of accounts. The first factor variance of 21.56%, shows that this factor highly affects the extent of financial inclusion in the village Majri, followed by second factor support system with variance explaining 14.14% influence, third factor Obstacles with variance 9.92%, fourth factor Use of accounts with variance 9.48% and factor fifth with variance 8.496%. Socio-economic status factor comprises of variables economic category, occupation, religion, caste and education. It has been observed that government has given various aids to the rural people like MNREGA, SHG in collaboration with banks. This would Page 394
This table shows the results of the "Pearson Chi- Square" row. We can see here that χ(1)=0.679, p=0.954this tells us that there is no statistically significant association between economic category and opening of bank account. of the village. But these facilities are not even discussed with the actually needy people. It was observed that no school up to senior secondary level was there in the village that is one of the major reasons of lack of awareness among the people. Suggestions and Policy Recommendations The results of chi square shows that there is an insignificant association between economic category and opening of bank account among people of Majri village as value of Pearson chi square has found to be insignificant. This shows that the income of people has no influence on opening of account. People had opened account to avail the facility of saving account. As information collected from the people of Majri it has been observed that the people having bank accounts have never visited bank to avail any facility. There basic purpose has been withdrawal of money from the account received through DBT. Although they have opened saving accounts with the bank but they hardly made any transaction through their accounts. Finding of the study Page 395 It has been observed that majority of the respondents have opened bank accounts but they were not aware about the financial services provided by banks such as ATM cum debit card, Credit card, net banking, insurance schemes, bill payments and SMS facility. The accessibility of banking services has been poor on account of various constraints such as distance, no money to save and difficult to understand banking services. The type of account opened by people is savings but due to less income the purpose has been to get benefit of direct benefit transfers for availing benefit of gas subsidy, pension, and wage payment if any. People were unaware about various core banking services like credit cards, net banking, insurance schemes. They have heard the term MGNREGA but didn t know about the scheme. It was observed during survey that maximum of the schemes benefits are taken by the dominant classes The need of the hour is therefore the banks in Majri village should organize financial literacy programs for the benefit of vulnerable sections of the society. This may help in creating awareness among the vulnerable groups. Bank should appoint business correspondents to disseminate its service in the every nook & corner of the village. At least one branch of the bank with ATM facility should be there with in the village so that maximum of the people can take advantage of these facilities. It is recommended that Government school in the village must be up to senior secondary level so that literacy rate can be improved. The government should include financial literacy schemes in the curriculum at high school and college level. It is suggested that banners/pamphlet/nukad-natak etc. should either provided by bank or any scheme of the Government must be displayed in the regional language to spread the awareness among all. V. CONCLUSION Financial inclusion and infrastructure should go hand in hand for all round development of vulnerable section of the society in order to ensure that they should have access to education; information and insurances apart from financial services. Financial services should channelize through increasing marketing operations thereby, increasing banking habits among rural household. Financial literacy, time consumption, high cost, distance etc. continue to be a road block to financial inclusion in many areas. REFERENCES [1] Gadewar A U (2007) Financial Inclusion: Issues and Challenges Vinimaya January March 2007 Vol. XXVII No. 4. [2] B. Sujatha, Financial Inclusion Concepts and Strategies ICFAI University Press. [3] Basu Priya (2005), A Financial System for India s Poor. Economic and Political Weekly, September 10, 2005. pp. 4008-4012
[4] Usha Thorat (2007). Financial Inclusion The Indian Experience, Financial Inclusion Conference. London. BIS Review. [5] J. Vinayak, Financial Inclusion The challenges ahead, Business line, Mangalore, August. 29 [6] Sandeep Aggarwal, Financial Inclusion: Understanding through Behavioural Perspectives, ZENITH International Journal of Business Economics and Management Research Vol. 2 Issue 2, February 2012, pp. 225-229. [7] Sadhan Kumar Chattopadhyay, Financial inclusion in India: A case-study of West Bengal, Paper presented at seminar. [8] Thorat, U. (2008): Inclusive Growth the Role of Banks in Emerging Economies, lecture delivered at Independence Commemoration Lecture, 2008 at the Central Bank of Sri Lanka, Colombo, 28 February. Page 396